Friday, 23 June 2017

Telford & Wrekin making false claims about NuPlace "profit" again

Telford & Wrekin Council are claiming that their NuPlace social landlord company made a pre-tax profit of £274k last year which has been put into front line services. They must have got Diane Abbott in to do the books because the numbers just don't add up.

NuPlace spent millions on building work last year and has just 136 properties rented out and generating an income. Their gross "profit" is a claimed £438k which is £3,220 per house. The average rent is about £630 per month ("affordable" rent) which means the council are claiming a gross profit margin of about 42.5%!

After paying interest on the council's loans they claim to have made a £274k pre-tax profit which the council says has been put into front line services. But that leaves an unspecified tax bill to pay so there isn't £274k "profit" to put into services. How much is the tax bill? They don't say but corporation tax is 19% and if there's a VAT bill to pay as well that's 5% for energy efficiency materials and 20% for everything else. A good £100k of that £274k could end up being spent on tax.

NuPlace are only paying the interest on loans that Telford & Wrekin Council took out for them so the "profit" doesn't exist. If they were paying their loans they would make a huge loss. But they aren't paying their loans off, they and the council are gambling on being able to make enough money by selling off all their houses to pay off the loans when the banks want their money back.

No matter how creative they get with their accounting, NuPlace is a loss-making operation which exposes the council to tens of millions of pounds of risk. The money that is being siphoned off and branded "profit" is money that should be paying down debts to reduce the risk to taxpayers.